Defaulting Borrower Opposition To Referee Appointment
Typically, the first and main difficulty a lender encounters with a borrower in foreclosure is receiving an answer, which then requires a motion for summary judgment and a concurrent delay of many months. But there is not much new about that. Somewhat more obscure – and the focus here – is the borrower who defaults in the foreclosure (no answer, no appearance) but then surfaces to oppose the lender’s application to appoint a referee to compute and for a default judgment against non-appearing parties. A recent case highlights the controlling principles for both lender and borrower. [Newrez LLC v. Jebco OGM Resources, 2025 WL 814122, ___ N.Y.S.3d ___ (4th Dept, 2025.)]
First, this situation should not be confused with the closely related circumstance where a non-appearing defendant seeks permission to submit a late answer. To obtain such relief, a defendant must demonstrate both an excuse for its lateness and a meritorious defense to the action.
Here, and similarly, the recent case holds that the non-appearing defendant must show either that there was no default in appearing, or that it has a reasonable excuse for delay and a meritorious defense. [Newrez LLC v. Jebco OGM Resources, 2025 WL 814122, ___ N.Y.S.3d ___ (4th Dept, 2025), citing HSBC Bank USA, N.A. v. Clayton, 146 A.D.3d 942, 944, 45 N.Y.S.3d 543 (2d Dept. 2017), lv denied 29 N.Y.3d 1073, 57 N.Y.S.3d 460, 79 N.E.3d 1123 (2017); see HSBC Bank USA, N.A. v. Scivoletti, 212 A.D.3d 600, 602, 182 N.Y.S.3d 695 (2d Dept. 2023)]. Having not served an answer, the borrower was in default but failed to demonstrate either that it was not in default in the case or that it had a reasonable excuse for its delay in serving the answer. (With no excuse, examination of merit need not be reached.)
What the defendant did in this case, and what makes it worthy of attention, is that it had no jurisdictional arguments. That is, it couldn’t claim that it was not served. What it did instead was to raise a potpourri of defenses in opposition to the referee’s appointment. Recall anew that it had never answered in the case and thus had previously presented nothing. These defenses in opposition to the motion to appoint the referee included standing, statute of limitations, collateral estoppel, a claimed need for additional discovery and the existence of issues of fact.
The key of the cited case is the holding that all these defenses were simply not before the trial court (because the borrower had defaulted in answering or appearing) and so appointment of the referee was affirmed.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2024), is a partner with Berkman, Henoch, Peterson & Peddy, P.C. in Garden City, New York. He is also a member of the The American College of Real Estate Lawyers, a fellow of The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.